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17 Jan 2013
Forex Flash: Officials weigh ESM recapitalizations – Deutsche Bank
FXstreet.com (Barcelona) - The head of the ESM believes that allowing the fund to directly recapitalize banks would deplete its lending capacity much faster than extending loans to governments.
According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “Officials are now discussing whether the home government should retain a stake in additional recapitalizations, echoing a similar report from earlier in the week.”
As such, “Such national stakes could absorb the first round of losses on capital investments and protect the ESM and the rest of the eurozone.” they add. ECB Governing Council member Ewald Nowotny said he did not share Juncker’s concern about the euro’s strength, adding that the ECB targeted price stability rather than exchange rates. Juncker said on Tuesday that the euro was “dangerously high” which helped cause a 0.6% selloff in EURUSD.
As such, “Such national stakes could absorb the first round of losses on capital investments and protect the ESM and the rest of the eurozone.” they add. ECB Governing Council member Ewald Nowotny said he did not share Juncker’s concern about the euro’s strength, adding that the ECB targeted price stability rather than exchange rates. Juncker said on Tuesday that the euro was “dangerously high” which helped cause a 0.6% selloff in EURUSD.